South Africa has been left behind

Reserve Bank Governor Lesetja Kganyago warned that South Africa has fallen behind some of its peers as cash remains the country’s most popular form of payment.

The governor said the country could benefit immensely from switching over to cheaper, safer and faster digital payments.

Speaking at the Reserve Bank’s latest Annual General Meeting (AGM), Kganyago emphasised the importance of digitising South Africa’s payment systems.

“In South Africa, we have long taken pride in our relatively sophisticated payments systems, but the truth is that we have fallen behind some of our peers,” he said. 

“New digital technologies have emerged. In countries such as Brazil, digital retail payments have spread rapidly across society. Meanwhile, here in South Africa, cash – a technology that is literally centuries old – remains the single most popular form of payment.”

The governor explained that, while the Reserve Bank is happy to provide notes and coins to the economy, cheap, safe and fast digital payments would offer many benefits to South Africans.

“We intend to see that the gains of technological advancement are shared and not reserved for the small fraction of consumers who carry the latest smartphones,” he said. 

Interbank and Regulatory Forums manager at Standard Bank’s CIB division, Nthabiseng Mohale, previously said that while trends point to a sharp rise in digital transactions in South Africa, cash remains a crucial part of the local economy.

This is largely because much of the rise in digital transactions has been from wealthier South Africans and businesses, with the lower-income majority still mainly dealing in physical currency.

The latest data from the Reserve Bank shows that cash circulation has remained steady since 2009, with R171 billion still in circulation in 2023.

Mohale said this data is a strong indicator that cash remains deeply embedded in the country’s consumer psyche despite the ongoing push for digital payments. 

Reserve Bank data shows that nearly half of all adults withdraw all their money as soon as it is deposited in their accounts. Therefore, most payments in South Africa are conducted using physical banknotes.

Reserve Bank’s cashless push

The persevering popularity of cash in South Africa has been a pain point for the Reserve Bank for years.

This is due to several reasons, including cash generally being more unsafe and difficult to track, and, as Kganyago points out, could see South Africa fall behind its peers.

The central bank has previously attributed the dominance of cash to a lack of trust in banks and the fees associated with card transactions, which present significant hurdles to adopting cashless alternatives. 

To address this, he said the Reserve Bank has been proactively working with the private sector to scale up a fast payments system in the country that will be more accessible, efficient and affordable.

“We also expect these efforts will attract innovative firms to help South Africa regain its place at the forefront of the payments frontier, instead of lagging behind,” Kganyago said at the Reserve Bank’s AGM. 

“In SADC, we continue our journey to modernise our payment ecosystem, and have been working with other central banks in the region to deliver more efficient and cost-effective cross-border payments.”

The central bank has also launched its Payments Ecosystem Modernisation Programme, which is integral to the SARB’s 2030 Strategy. 

Kganyago previously explained that this programme is “a bold step towards transforming how money moves within our economy”.

“This modernisation is not just about updating systems or technology. For me, it is about building a payments infrastructure that truly serves the people of South Africa.”

Through this programme, the Reserve Bank will take an active role in driving digital payments by setting the direction for domestic payment schemes and national product development. 

In addition, a national payment utility (NPU) will play a central role in this effort by providing the necessary middle-mile infrastructure to facilitate broader digital payment adoption, especially for cash-reliant segments of the economy.